Hess 2008 Annual Report Download - page 36

• The Corporation drilled a successful exploration well in Area 54 offshore Libya (Hess 100%). The
Corporation intends to obtain 3D seismic in Area 54 and further drilling is planned.
• The Corporation drilled a successful exploration well on the West Med Block (Hess 55%) in Egypt, which
encountered natural gas and crude oil. The Corporation is currently conducting engineering studies and
further exploratory drilling is planned.
• The operator commenced drilling of an exploration well on the BM-S-22 Block (Hess 40%) in the Santos
Basin offshore Brazil and filed a Notice of Discovery with the regulators on January 16, 2009.
• The Corporation was successful in acquiring new deepwater blocks in the Central and Western Gulf of
Mexico and the offshore Semai V exploration block in Indonesia.
Marketing and Refining
The Corporation’s strategy for the M&R segment is to deliver consistent operating performance and generate
free cash flow. M&R net income was $277 million in 2008, $300 million in 2007 and $394 million in 2006. Earnings
in 2008 and 2007 reflect lower average margins compared to the prior periods.
Refining operations contributed net income of $73 million in 2008, $193 million in 2007 and $240 million in
2006. The Corporation received cash distributions from HOVENSA totaling $50 million in 2008, $300 million in
2007 and $400 million in 2006. Gross crude runs at HOVENSA averaged 441,000 barrels per day in 2008 compared
with 454,000 barrels per day in 2007 and 448,000 barrels per day in 2006. In 2007, HOVENSA successfully
completed the first turnaround of its delayed coker unit. The Port Reading refinery operated at an average of
64,000 barrels per day in 2008 versus 61,000 barrels per day in 2007 and 63,000 barrels per day in 2006. Marketing
earnings were $240 million in 2008, $83 million in 2007 and $108 million in 2006. Total refined product sales
volumes averaged 472,000 barrels per day in 2008 compared with 451,000 barrels per day in 2007 and
459,000 barrels per day in 2006.
Liquidity and Capital and Exploratory Expenditures
Net cash provided by operating activities was $4,567 million in 2008, $3,507 million in 2007 and
$3,491 million in 2006, principally reflecting increased earnings. At December 31, 2008, cash and cash
equivalents totaled $908 million compared with $607 million at December 31, 2007. Total debt was
$3,955 million at December 31, 2008 compared with $3,980 million at December 31, 2007. The Corporation’s
debt to capitalization ratio at December 31, 2008 was 24.3% compared with 28.9% at the end of 2007. The
Corporation has debt maturities of $143 million in 2009 and $31 million in 2010. In February 2009, the Corporation
issued $250 million of 5 year notes with a coupon of 7% and $1 billion of 10 year notes with a coupon of 8.125%.
Capital and exploratory expenditures were as follows for the years ended December 31:
2008 2007
(Millions of dollars)
Exploration and Production
United States ................................................. $2,164 $1,603
International .................................................. 2,477 2,183
Total Exploration and Production................................... 4,641 3,786
Marketing, Refining and Corporate ................................... 187 140
Total Capital and Exploratory Expenditures ........................... $4,828 $3,926
Exploration expenses charged to income included above:
United States ................................................. $ 211 $ 192
International .................................................. 179 156
Total exploration expenses charged to income included above ............. $ 390 $ 348
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